Last week we suggested that the “long dark shadow” of deflation was starting to fade, and given the impressive rally off the February low through the end of the month, we would suggest that sentiment was overly negative going into the 2016 equity market lows, as the global swoon was mostly about disappointing forward momentum and not some major, difficult-to-solve obstacle.
The deflationary selling binge in commodities has continued with a vengeance, with sagging crude oil prices leading the way.
In looking ahead to the coming week, we expect additional commodity pressure going into the FOMC meeting off of a stronger dollar in anticipation of an interest rate hike.
Risk sentiment received a shot in the arm last week after the latest FOMC meeting tamped down concerns over global growth and used more decisive language in favor of a December interest rate hike.
An impressive stock market rally has continued in the face of mixed US economic data, China continues to show signs of weakness, and the Euro zone isn’t sure if it needs more central bank assistance.
The impressive stock market rally so far in October highlights the ability of the marketplace to put an optimistic face on the global situation.
This weekly feature examines chart formations, along with technical indicators, of two to three commodity markets. Breakouts of these formations may lead to trading recommendations published by the Trade Spotlight advisory service.
An important junction lies ahead as fears about China have returned to the marketplace despite two days of Chinese holidays finishing out the week.
We won’t suggest that the recent lows in many commodities are solid, but value-hunt buying of copper assets by Carl Icahn, a $4.00 single-day rise in crude oil prices, and a 1,000-point, 2-day bounce in the Dow suggest that sentiment was overdone on a number of fronts.
Despite the best efforts of the left, right and center factions in Greece, the situation there should drift from being a major influence on international financial markets to a second page, sad, social event.